How does the 1:10 bonus issue change the equity price of ICICIBANK?
Divide equity by 1.1, as explained for future price by Bharat,
ICICI Bank Limited (Symbol : ICICIBANK) has issued a bonus to its shareholders in the ratio of 1:10, i.e. 1 bonus equity share for every 10 equity shares bought on or before Ex-Cum date of June 19, 2017. (Ex-Date is June 20, 2017 and Record Date is June 21st, 2017).
Calculation of adjustment factor:
Adjustment factor for Bonus issue of A:B is defined as (A+B)/B. In the case of ICICIBANK, the adjustment factor is (1+10)/10 = 1.1, since the bonus issue ratio is 1:10.
You hold 20 shares of ICICIBANK in Demat on Ex-Cum date of June 19th, 2017 and are eligible for the bonus issue of 1:10.
Let’s say the average price of the 20 shares you hold is 320.
After bonus, you will have 22 shares, i.e. 20 shares at Rs.320 and 2 bonus shares at Rs.0.
The average price of the 20 shares you hold after bonus is (320*20)/22 = Rs.290.91
If you notice, the average price of the 20 shares you hold has dropped by about 9% and this amount is credited to your account in the form of bonus shares. The total value of the all your shares remains the same after a bonus.
You hold 15 shares of ICICIBANK in Demat on Ex-Cum date of June 19th, 2017 and are eligible for the bonus issue of 1:10.
Let’s say the average price of the 15 shares you hold is 320.
After bonus, you will have 16 shares, i.e. 15 shares at Rs.320 and 1 bonus shares at Rs.0.
The average price of the 16 shares you hold after bonus is (320*15)/16 = Rs.300.
The remaining amount for the 0.5 bonus shares for the 5 remaining shares in your Demat will be transferred to your bank account directly by ICICI Bank’s RTA executing this bonus issue.
The bonus shares will be directly transferred to your Demat account during a fixed period after Record Date which could usually take an average of 15 working days. You will receive an SMS from your Depository when the bonus shares are credited in your Demat account.
Hi Bharat, as you explained in Case 1, I had received a bonus share for 4 shares of CONCOR shares I was holding. My number of shares did update to 5. But my average price in Kite holding did not change. This reflected poorly on my P&L and I guess that shows my P&L incorrectly. I guess Kite doesn’t adjust average price as per bonus issued.
@dtrade, Kite/Q uses FIFO to calculate your average price for the purpose of taxation as this is how your trades are considered while filing tax.
Kite will show your 4 shares of Concor at it’s initial buy price and the 1 bonus share will be at 0.
Because of this, there will be a drop in your PNL for the 4 shares but this is made up in the bonus share credited into your account.
A share is added is fine but my actual P&L is wrong. Currently it shows me in Loss, whereas actually I am in profit.
It didn’t work. Thanks for the suggestion though.
I purchased ICICI Bank on 20th June. Am i eligible for Bonus or not. Its said that Ex Date is 20th and Record date is 24th June.
Thanks in Advance